October 16, 2017

Gift tax looms for Bitcoin use in South Korea

Business

October 16, 2017

Prompted by the rising volume of domestic Bitcoin trading, regulators in South Korea are now considering imposing tax on the use of cryptocurrency in the country.

National Tax Service (NTS) Commissioner Han Seung-hee told legislators at a meeting last week that the government agency is discussing with the Ministry of Strategy and Finance “how to best tax cryptocurrencies,” reported news.bitcoin.com, quoting a Business Post article. Among the measures being considered is to impose value-added tax or a capital gains tax on digital currencies like Bitcoin, according to the commissioner.

“I am still taxing business income, and I am discussing whether to tax the value-added tax or capital gains tax with regard to virtual currencies such as Bitcoin,” Han said, adding that they may also impose “gift tax” on cryptocurrencies since the use of Bitcoin and other digital currencies “may lead to gift tax evasion.”

At the moment, the NTS is “monitoring the status of the [cryptocurrency] transactions and will move forward quickly,” the commissioner said.

Despite being one of the world’s busiest markets for digital currency trading, South Korea currently doesn’t have a regulatory framework that would give cryptocurrencies like Bitcoin and Bitcoin Cash legal grounds in the country.

In July, Rep. Park Yong-jin, member of the ruling Democratic Party of Korea, drew up a set of bills seeking to build a regulatory framework for digital currencies. Park stated in his proposal that there is a need to address “the void of a state-led protection that guarantees digital currency’s value,” citing “digital currency’s nonexchangeability to other existing currencies” as well as “the possibility of wreaking havoc on national economy from digital currency bubble burst.”

Now, it appears that South Korea is looking at the measures imposed by pro-cryptocurrency Japan, which has classified cryptocurrencies as “general assets or services and treat them as subject to excise tax, according to the report. After signing a landmark bill early this year that recognize cryptocurrencies like bitcoin as a method of payment “for the cost of purchase or rent of items or receipt of services and which can be transferred by means of electronic data processing systems,” Japanese lawmakers also officially eliminated consumption tax on the sale of Bitcoin starting July 1.